Lanshan Pty Ltd v F3 Enterprises Pty Ltd
[2022] VCC 1850
•8 November 2022
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
General List
Case No. CI-19-06277
| LANSHAN PTY LTD (ACN 159 606 818) | Plaintiff |
| v | |
| F3 ENTERPRISES PTY LTD (ACN 163 104 578) | Defendant |
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JUDGE: | Her Honour Judge Marks | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16, 18, 22 and 23 March 2021, 22, 23, 24 and 28 June 2021, 2 December 2021, and 23 March 2022 | |
DATE OF JUDGMENT: | 8 November 2022 | |
CASE MAY BE CITED AS: | Lanshan Pty Ltd v F3 Enterprises Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 1850 | |
REASONS FOR JUDGMENT
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PROPERTY – LEASE – LICENCE – whether agreement granting use ‘to the exclusion of all others’ of ‘car parking spaces and facilities’ for a 99 year period for a yearly fee constituted a lease or licence of that area – exclusive possession granted – defining feature of lease – Radaich v Smith (1959) 101 CLR 209 – agreement granted a lease of that area
CONTRACTS – CONSTRUCTION – UNCERTAINTY – whether agreement void for uncertainty – whether imprecise description of physical area amounts to uncertainty – agreement not void for uncertainty
CONTRACTS – CONSTRUCTION – implied contract – whether reasonable person would infer contract – conduct and communications of parties - both parties considered themselves bound by the agreement – Ying Mui Pty Ltd v Hoh (No.3) [2017] VSC 29
CONTRACTS – NOVATION – ALH Group Property Holdings Pty Ltd v Chief Cmr of State Revenue (2012) 245 CLR 338 applied – novation established – performance of original contractual terms amount to consideration – Kai Ling (Australia) Pty Ltd v Rosengreen [2009] NSWCA 3 applied
CONTRACTS – execution of contract before company registration – s 131 Corporations Act 2001 (Cth) – ratification of contract
ESTOPPEL – CONVENTIONAL ESTOPPEL – conventional estoppel established
ESTOPPEL – ESTOPPEL BY REPRESENTATION – estoppel by representation established
CONTRACTS – DEFAULT NOTICE – default notice did not specify the alleged default with sufficient particularity – default notice invalid
INSURANCE – PUBLIC LIABILITY INSURANCE – policy construction – meaning of public liability insurance
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr H Kirimof | Mahons with Yuncken & Yuncken Lawyers |
| For the Defendant | Mr E Gisonda | Gadens |
Table of Contents
INTRODUCTION
TRIAL
CHRONOLOGY
Permit
Licence Agreement
Property transfers, caveat and negotiations
Transfer of Licence Agreement
Settlement of Adjacent Property and subsequent events
Default Notice
ISSUES
1.0. INTRODUCTORY ISSUES
1.1. Is the Licence Agreement a lease?
1.2. If ‘yes’ to (1.1), is the Licence Agreement void by reason of section 5(1) of the Subdivision Act 1988 (Vic)
1.3. Is the Licence Agreement void for uncertainty?
1.4. If the business at 267 Mickleham Road is operated by a lessee, does the Licence Agreement allow the customers of the business to use the car park?
1.5. If ‘no’ to (1.4), is Lanshan estopped from relying on this construction of the Licence Agreement?
2. Is the Licence Agreement enforceable by F3 against Lanshan
2.1. Did Lanshan become a party to the Licence Agreement in or from November 2012?
2.1.1. Was there a transfer or assignment of the Licence Agreement to Lanshan?
2.1.2. Was there a novation of the Licence Agreement to Lanshan?
2.1.3. Did Lanshan become a party to the Licence Agreement by way of a tripartite agreement?
2.1.4. Did Lanshan become a party to the Licence Agreement by way of a bipartite agreement?
2.2. If ‘yes’ to (2.1), did F3 become a party to the Licence Agreement on or from June 2013?
2.2.1. Was there a transfer or assignment of the Licence Agreement to F3?
2.2.2. Was there a novation of the Licence Agreement to F3?
2.2.3. Did F3 and Lanshan become a party to the Licence Agreement by way of a tripartite agreement?
2.3. If ‘no’ to (2.1), did F3 and Lanshan become a party to the Licence Agreement on or from June 2013?
2.3.1 Did F3 and Lanshan become a party to the Licence Agreement by way of a tripartite agreement?
2.3.2. Did F3 and Lanshan become a party to the Licence Agreement by way of a bipartite agreement?
2.4. If ‘no’ to (2.2) and (2.3), is Lanshan estopped from denying that the Licence Agreement is enforceable by F3 against Lanshan?
2.4.1. Is there an estoppel by representation?
2.4.1.1. Did F3 become bound by the Contract of Sale?
2.4.1.2. If ‘no’ to (2.4.1.1), what is the consequence for F3’s claim of an estoppel by representation?
2.4.2. Is there a conventional estoppel?
2.4.3. Is there a proprietary estoppel?
2.5. If ‘yes’ to (2.2), (2.3) or (2.4), and if the Licence Agreement is a Lease, have the formalities of the Property Law Act 1958 (Vic) been satisfied?
2.6. If ‘no’ to (2.5), what are the consequences?
3.1.3. If ‘yes’ to (3.1.2), did the breach entitle Lanshan to terminate the Licence Agreement?
3.2 Was the Licence Agreement terminated because F3 did not maintain a public liability insurance policy with respect to the car parking area?
Not really public liability insurance?
3.2.1 Did such policy provide protection to F3 of the kind contemplated by clause 4 of the Licence Agreement.
3.2.2. If ‘yes’ to (3.2.1), did the policy comply with clause 4 of the Licence Agreement?
Policy
Payment
Policy Terms
Finding
3.2.3. If ‘no’ to (3.2.1) or (3.2.2), was Lanshan entitled to terminate the Licence Agreement?
History of the parties’ answer to (3.2.3)
Background to termination
Inadequate Default Notice
Construction of default notice
CONCLUSION
HER HONOUR:
INTRODUCTION
1Lanshan Pty Ltd (Lanshan) owns a motel property at 265 Mickleham Road, Westmeadows (the Motel Property), which has a large car parking area at the rear. F3 Enterprises Pty Ltd (F3) owns the property next door, at 267 Mickleham Road, Westmeadows (the Adjacent Property) and claims that it (and its tenant) is entitled to use of the car parking area at the rear of the Motel Property. F3’s tenant is running an Indian restaurant from the Adjacent Property at the moment; the property is also able to be used as an event centre. The Adjacent Property does not have sufficient car parking facilities on its own property to support its use as a restaurant or event centre.
2The background to this complicated dispute dates back to 1997, when the Hume City Council issued a permit relating to the two properties. The permit allowed for the development and use of the Adjacent Property for the purpose of reception rooms on condition that there must first be a licence agreement entered into by the owner of the Adjacent Property and the owner of the Motel Property which would give the Adjacent Property use of car parking spaces on the Motel Property, for a period of 99 years.
3A few years later, on 27 September 2001, the Licence Agreement at the heart of this dispute was entered into as required by the permit. It was executed by the then Motel Property owner, Joseph Digby, and the then Adjacent Property owner, Tullamarine Pty Ltd (Tullamarine). (Joseph Digby and his wife Josephine Digby were directors of Tullamarine, so at that stage the two properties were owned by related parties. That fact does not affect the issues in this case).
4By the Licence Agreement, the Motel Property owner agreed to certain car parking spaces and facilities at the western end of the Motel Property being for the exclusive use of the owner of the Adjacent Property and his patrons and guests (beneficiaries). The Licence Agreement also conferred on the beneficiaries, access rights of entry and exit to the car parking spaces and facilities, across the driveways of the Motel Property (identified on the annexed plan). The Licence Agreement was for a 99 year period and was the subject of a nominal annual licence fee.
5Later, ownership of the properties changed.
6The Motel Property was sold in 2003 to another company. Around 2011, that company sold it to Kenyon International Pty Ltd (Kenyon).
7Then, in 2012, Lanshan purchased the Motel Property from Kenyon. At that time, Lanshan executed an agreement (Assignment Agreement) purporting to transfer the licensor’s rights and obligations under the Licence Agreement from Kenyon to it.
8After Joseph Digby died, his widow Josephine Digby (Digby) held the Adjacent Property as executrix of his estate. In 2013, F3 purchased the Adjacent Property from Digby. Before settling the purchase, F3 entered into a Transfer of Licence Agreement with Digby and Lanshan (Transfer of Licence Agreement). Lanshan is described in the Transfer of Licence Agreement as the Licensor; Digby is described as the Current Licensee; and F3 is described as the New Licensee.
9F3 only settled on the purchase of the Adjacent Property because Lanshan represented that Lanshan was bound by the Licence Agreement, and signed the Transfer of Licence Agreement. F3 would not have settled on the Adjacent Property without knowing that the Adjacent Property had the use of the car park (required in order for the Adjacent Property to be run as an events centre at that time; and now required for it to be run as a restaurant as well).
10However, as detailed below, F3 and Lanshan have now had years of dispute regarding the car park, and Lanshan now denies it is bound by the Licence Agreement.
11In this litigation, Lanshan seeks various declarations to the effect that it is not bound by the Licence Agreement.
12On the other hand, F3 seeks to enforce the Licence Agreement (or one in like terms) against Lanshan. I say ‘in like terms’, as F3 puts its case in various ways, including that, (if Lanshan and F3 are not parties to the Licence Agreement by way of novation or assignment or transfer), Lanshan and F3 are bound by an agreement in the same terms as the Licence Agreement (with Lanshan as licensor and F3 as licensee).
13I refer to the ‘Licence Agreement’ throughout this judgment, without specifying that on occasion I mean an agreement in like terms (which will be clear from the context). I also refer to the ‘licensor’ and ‘licensee’ in describing the parties to the Licence Agreement even though I find that the Licence Agreement is properly characterised as a lease of the car parking area (as discussed below).
14The reasons Lanshan says it is not bound by the Licence Agreement include the Licence Agreement in fact is a lease, and that as a result, it is void by reason of the operation of s 5 of the Subdivision Act 1988 (Vic); that it is void for uncertainty; that the Assignment Agreement and the Transfer of Licence Agreement were ineffective and F3 is not a party to the Licence Agreement; and that if Lanshan was ever bound by the Licence Agreement then it stopped being bound in October 2019, after it served a Notice of Default on F3, and the alleged defaults were not remedied.
15For reasons explained below, I find that Lanshan is bound by the Licence Agreement as licensor, and F3 can enforce it as licensee.
TRIAL
16This trial took a long time to be finalised. Proceedings were issued by Lanshan in December 2019. The first day of the trial was 16 March 2021, with the case originally having been listed for two days, later five days. It ended up taking 10 days, which took place with some fits and starts as various adjournments were required along the way, including due to a successful application by F3 to amend its defence and counterclaim, and availability of the Court and counsel for further trial days which had not originally been listed. Once oral evidence had finished, extensive written submissions were filed, followed by oral submissions, then further written submissions, and more oral submissions on the final day of trial, 23 March 2022. Even then the case was not quite done, as Lanshan had not been able to complete its oral submissions on a couple of points. Rather than coming back for yet another day of trial, orders were made by consent allowing written submissions on certain points by both sides. Final written submissions on limited points were then filed on 5 April 2022.
17The issues raised were complex. Some fell away by the end of the trial; others were added as pleadings evolved and further evidence was given. Counsel helpfully provided a detailed joint list of issues which was amended as the trial proceeded. Those issues are dealt with below, in the order the parties listed them.
18There were three witnesses.
19Mr Tao (Tony) Chen gave evidence for Lanshan. He was its sole director and secretary. He does not read or speak English, and had an interpreter at trial. He was an unimpressive witness, who professed to know virtually nothing about the many letters Lanshan’s lawyers had sent various parties regarding the Licence Agreement, and the various negotiations that went on about this.
20Chen gave evidence that he was not told about the Licence Agreement included in the vendor’s statement when Lanshan bought the property. He claims to have effectively left his solicitor to attend to the sale matters. He said the vendor’s statement is ‘very thick’ and that he only knew the price and settlement date.
21He said he had not known or did not remember about the caveat Digby put on the Motel Property, or about the negotiations that Lanshan’s solicitor carried out with Digby and F3 concerning the Transfer of Licence Agreement. He claimed that he had not understood what the Transfer of Licence Agreement that Digby, F3 and Lanshan then executed was about (despite signing it for Lanshan). He repeatedly said that he just signed it because his solicitor told him to sign or ‘I will be sued.’ He professed little knowledge of the legal proceedings that F3 brought against Lanshan at the Victorian Civil and Administrative Tribunal (VCAT) to enforce the Licence Agreement.
22Chen gave evidence that the first time he met Mr Robert Hernandez (F3’s director) was at those VCAT proceedings. He also said that the first time he saw the Licence Agreement was when it was produced by the other side at VCAT and that he had not known about it, or seen it, when he purchased the Motel Property. He said he did not know until then that F3 even had a property.
23His evidence was frequently contradicted by documents from the relevant period. For example, he said that Mr Paul Tang (Tang) of PSMF Lawyers & Consultants (PSMF) – the solicitor acting for Lanshan throughout this time – did not tell him about anything much. This is despite the fact that Tang’s letters frequently identified instructions from his client, and there were even detailed file notes in evidence of conversations Tang had with Chen. The obvious inference that Chen wanted the Court to accept was that Tang was acting on a frolic of his own in sending those letters on behalf of Lanshan. Such assertion was not supported by any of the written evidence, and I reject it. Chen is director of a number of companies owning various properties and Tang was his lawyer of choice. Chen gave evidence that Tang spoke Mandarin; I am satisfied that where Tang wrote letters asserting he had Lanshan’s instructions, and made file notes that he discussed things with Chen, he had those instructions from Chen on behalf of Lanshan, and discussed the relevant aspects in Mandarin. Chen’s evidence was not credible. I do not accept it on contested issues unless it is independently corroborated.
24Counsel for Lanshan conceded in the present proceeding that Lanshan does not submit that it is not bound by what its solicitor did (in other words, where its solicitor sent letters purporting to put Lanshan’s position, and instructions, Lanshan is bound by those). That is an appropriate concession.
25F3 called Mr Robert Hernandez (Hernandez), F3’s director, as a witness. His evidence was consistent with the contemporaneous documents, and I accept it generally. F3 also called Mr Joseph Xuereb (Xuereb), F3’s insurance broker. I also accept his evidence generally, which was not challenged in any significant way by Lanshan.
CHRONOLOGY
26I set out the complicated history of this matter here, in some detail. It will help to put the issues in the case into context.
Permit
27As mentioned above, in July 1997 the City of Hume issued a planning permit, allowing for the development and use of the Adjacent Property for the purpose of reception rooms, on conditions which included the availability of associated car parking on the Motel Property. The following conditions attached to the original permit are relevant:
…
10.Prior to the commencement of the use and the occupation of any buildings hereby approved, the area aside [sic] for the parking of vehicles at 265 Mickleham Road (motel site), together with the aisles and drives must be properly formed to such levels that it can be utilised in accordance with the said plan and must be drained and sealed with an all weather seal coat which shall be capable of being marked, and such drainage and sealing must be carried out to the satisfaction of Council.
11.The areas set aside for the parking of vehicles, together with the associated access lanes as delineated on the endorsed plans must be made available for such use and not be used for any other purpose.
12.The boundaries of all car spaces and access lanes and the direction in which vehicles should proceed along the lanes, must, at all times be clearly indicated on the ground.
13.The owner, occupier and/or manager shall make every endeavour to ensure that customer, patron or visitor’s vehicles are parked within the site and not on the street.
14.All staff vehicles, including vehicles associated with the operation of the use, shall be parked within the site and not on the street.
15.In the event that on-site parking becomes insufficient and causes a nuisance, additional car parking shall be provided on site or on nearby land to the satisfaction of the Responsible Authority, within three months of a request in writing from Council.
16.The loading and unloading of vehicles and the delivery of goods must at all times be carried out within the boundaries of the site to the satisfaction of the Responsible Authority.
…
22.Appropriate signage must be installed at the motel and reception centre entrance to inform motorists of the location and provision of car parking to the satisfaction of the Responsible Authority.
…
26.Prior to the use of the reception centre permitted by this permit, the owner of No. 267 Mickleham Road, Tullamarine must enter into a Licence Agreement with the adjoining owner at No. 265 Mickleham Road, Tullamarine (motel site) for the use of the carparking facilities at the western end of the property, and the right of ingress at [sic] egress over the property at 265 Mickleham Road, Tullamarine for a period of ninety-nine years.
27.Once the Licence Agreement referred to in Condition 26 of the permit lapses, the use of the reception centre must cease, unless sufficient carparking is provided in close proximity to the reception centre to the satisfaction and approval of the Responsible Authority.
Licence Agreement
28The Licence Agreement at the heart of this dispute was entered into on 27 September 2001 between Tullamarine (described as ‘the Licensor’) and Joseph Digby (described as ‘the Licensee’). It was executed as a Deed. It was just three pages long, with a plan annexed to it (discussed further below). It stated:
WHEREAS the Licensor is the registered proprietor of the property known as 265 Mickleham Road, Tullamarine being the land more particularly described in Certificate of Title Volume 5768 Folio 498 (“the Property”) AND WHEREAS the Licensee is the registered proprietor of 267 Road, Tullamarine being the land more particularly described in Certificate of Title Volume 9485 Folio 992 upon which is constructed a building known as Bella Vista Reception Centre AND WHEREAS the Licensor desires to allocate to the Licensee subject to the terms of this Agreement certain car parking facilities on the Property of the Licensor and the right of ingress and egress over the Property of the Licensor for the use and benefit of the Licensee and his patrons and guests.
NOW THIS AGREEMENT WITNESSES:
1. The Licensor hereby grants to the Licensee at all times during the continuance of this licence and authorises the Licensee to permit his guests and patrons to use to the exclusion of all others the car parking spaces and facilities being those car parking spaces at the western end of the Property identified on the plan annexed to this licence. The Licensor hereby licenses to the Licensee to permit the patrons and guests of the Licensee the right of ingress and egress over the driveways of the Property for the purpose of accessing the said car parking facilities as identified on the said plan.
2. The Licensor grants this licence to the Licensee for a period of ninety-nine years and the Licensee undertakes and agrees during the continuance of this agreement to pay to the Licensor the sum of $1.00 per annum.
3. The Licensee shall maintain the carparking spaces in good order and condition and shall indemnify the Licensor for any damage done to the car parking spaces including damage to any adjacent fencing either by himself or by his patrons or guests or any other person using the said car parking spaces with his consent.
4. The Licensee shall maintain a public liability insurance policy with respect to the car parking area to a sum not less than $10 million.
5. The Licensee shall not be called upon to contribute to any levies with respect to the Property by way of rates or taxes.
6. The licence hereby created shall cease and be determined if the Licensee is in default of any of the terms of this licence and the Licensor has served a written notice on the Licensee identifying the default and the Licensor’s intention to determine the licence unless the default is remedied within fourteen days of the service of any notice and the Licensee fails to comply with that notice.
7. This Licence does not confer or constitute possession or occupation of the Property within the meaning of the Sale of Land Act 1962.
8. Any notice required to be served or delivered may be so served by being personally delivered or posted to the party to whom the notice is addressed at the address appearing in this Licence Agreement.
9. The Licensor and the Licensee acknowledge and agree that this Licence shall enure for the benefit of the Licensee and his assigns. It is further agreed that the Licensor shall not raise any objection to the transfer or assignment of this License. The Licensor and Licensee shall forthwith execute all documents as may be required to transfer or assign this Licence.
10. The Licensor and the Licensee acknowledge and agree that time shall be of the essence of this Licence and that in the event of any dispute between the parties this agreement shall be determined and interpreted pursuant to the laws of the State of Victoria.
Property transfers, caveat and negotiations
29On 1 February 2003, a transfer of the Motel Property was registered from the company formerly known as Tullamarine (now called One Hundred and Fifty-Seventh Larena Pty Ltd), to Whitsunday Holdings (Qld) Pty Ltd. Eight years later, on 12 January 2011, a transfer of the Motel Property was registered from Whitsunday Holdings (Qld) Pty Ltd to Kenyon.
30The following year, in 2012, Lanshan purchased the Motel Property from Kenyon.
31On 5 July 2012, Kenyon’s lawyer (Slater & Gordon) sent an email to Lanshan’s lawyer (Tang, at PSMF), relating to the sale of the Motel Property. The email attached a draft contract of sale between Kenyon and Jian (Jack) Chen (Jack Chen) and Cindy Wong and/or nominee. (Jack Chen is Tony Chen’s brother). The vendor’s statement which was incorporated, attached the Licence Agreement as one of the documents concerning the title.
32On 17 October 2012, Josephine Digby lodged an unregistered caveat over the Motel Property, via her solicitor, Maurice Blackburn. Joseph Digby had died by that stage, and she held the Adjacent Property in her capacity as executrix of his estate. It is clear from the lodging of the caveat, and the correspondence that followed, that she wanted to ensure that the proposed new owner of the Motel Property would continue to be bound by the Licence Agreement.
33On 9 November 2012, Lanshan’s lender, the National Australia Bank (NAB), sent an email to Lanshan’s solicitor attaching a copy of the caveat Digby had lodged, suggesting Lanshan investigate it, and saying that NAB would need to be notified of its withdrawal prior to settlement.
34On 15 November, Kenyon’s lawyer wrote to Digby’s lawyer, saying:
I confirm that my client and Ms Digby have now resolved all issues relating to the Licence Agreement (a copy of which was enclosed in the S 32) and the Licence Agreement continues to be on foot.
Please advise your client’s lender that I will be handing over at settlement, as request, a withdrawal of caveat … which I will shortly receive from Maurice Blackburn.
35That same day, on 15 November, Kenyon’s lawyer wrote to Digby’s lawyer regarding the ‘Licence Agreement Dispute’ and referring to a discussion between the lawyers the day before. He continued:
I confirm your client has accepted my settlement proposal set out in my letter dated 13 November 2012.
I acknowledge receipt of the Licence Fee paid by your client into trust.
As agreed, and without being an admission that the Licensee is not currently and/or has ever been in breach of the License, the Licensor acknowledges the continued existence of the License Agreement between the parties and withdraws all previous Notices of Breach of Licenses.
For the avoidance of any doubt I have also written to the Purchasers of my client’s Property to advise them that the Licence Agreement is on foot and all current notices of breach have been withdrawn.
Could you now kindly forward a Withdrawal of Caveat for the unregistered caveat … as soon as possible.
36On 16 November 2012, Digby’s lawyer wrote to Kenyon’s lawyer:
… Thank you for your letter dated 15 November 2012 confirming the agreement reached between our respective clients.
We note from our discussion on 14 November 2012, that you were to request from Lanshan … that it also acknowledged that the Licence Agreement remains on foot and will bind Lanshan, once the transfer to Lanshan has occurred.
Our client has requested that you obtain that confirmation in writing and provide it to us as a matter of priority. The Withdrawal of Caveat will then be provided immediately.
37On 23 November 2012, Lanshan’s lawyer wrote to Kenyon’s lawyer:
… I am instructed to inform you that provided settlement of the purchase proceeds, my client will abide by the Licence Agreement as attaché [sic] to the Contract, but will not accept any changes to the provisions in it if such changes are adverse to my client’s interests.
38On 28 November 2012, Digby’s lawyer wrote to Kenyon’s lawyer, copying in Lanshan’s lawyer:
Since both your client and Lanshan … have now confirmed the Licence Agreement (as defined in our previous correspondence) continues to bind both of them, we enclose receipt from Land Victoria confirming our client’s withdrawal of dealing number AJ974200H. Please advise when settlement of the sale to Lanshan … occurs.
Our client will require Lanshan … to provide her with immediate access to the car park, pursuant to the Licence Agreement, upon settlement of the sale. Failure to do so will result in immediate proceedings to enforce the Licence Agreement.
39On 17 December 2012, Kenyon’s lawyer wrote to Lanshan’s lawyer. The letter confirmed settlement had been arranged for 19 December 2012, attached a copy of the Licence Agreement as part of the documents which it said would be handed over at settlement, and referred to the fact that a withdrawal of caveat would be handed over.
40On 19 December 2012, settlement of the sale from Kenyon to Lanshan occurred.
41The next day, on 20 December 2012, a Contract of Sale for the Adjacent Property was signed. F3 was named purchaser; Digby the vendor. A copy of the Licence Agreement was included as part of the Contract of Sale.
42A few weeks later, on 12 January 2013, Lanshan put a fence up blocking the entrance to the car park from the Adjacent Property.
43On 24 January 2013, Digby’s lawyer wrote to Lanshan’s lawyer requiring the fence’s removal. The letter stated:
As you are aware:
1. the Properties are subject to a licence agreement dated 29 September 2001 … pursuant to which the registered proprietor of 265 Mickleham Road (the Motor Inn) granted to the registered proprietor of 267 Mickleham Road (the Bella Vista) ‘a right of ingress and egress over the driveways’ of the Motor Inn for the purposes of accessing and using the car parking facilities on the title of the Motor Inn identified on the plan annexed to the Licence Agreement;
2. your client purchased the Motor Inn in late 2012; and
3. your email of 23 November confirmed your client’s agreement to abide by the Licence Agreement.
We are instructed that your client has erected a fence which blocks the entrance to the car parking from the Bella Vista, denying our client her right of ingress and egress over the driveways of the Motor Inn. Accordingly, your client is currently in breach of the Licence Agreement.
Our client has executed a contract of sale in respect of the Bella Vista. A condition of that sale was the enforceability of the Licence Agreement. As a consequence, our client requires your client to:
1. confirm its intention to remove the fence by 3pm on 25 January 2013; and
2. effect that removal by 1 February 2013.
44On 30 January 2013, Lanshan’s lawyer responded:
We are instructed that your client has leased his property (267 Mickleham Road) to the previous owner of 265 Mickleham Road. Upon settlement of the purchase of the property at 265 Mickleham Road, our client has ended the lease of your client’s property. The fence that our client has erected is the boundary fence between our respective clients’ two properties. The previous owner of our client’s property did not erect a boundary fence for better security of the two properties. Since our client has ended the lease of your client’s property, our client needs to provide for the security of its own property by erecting the boundary fence and our client has every legal right to do so.
Your client’s patrons have been using and can continue to use the access road leading from our client’s property onto the carpark, which our client’s predecessor-in-title has licensed to your client. So there is no issue on access to the carpark.
45(It is not clear on the evidence what the reference to the lease of the Adjacent Property to the previous owner of the Motel Property relates to. Counsel for F3 speculated that it may be a reference to the fact the reception centre and motel used to work well as complementary businesses. In any event, it is not relevant to the issues here).
46On 1 April 2013, F3 was registered as a company. (Whilst there was initially an issue as to how this affected F3’s claims regarding the Licence Agreement given that it was not registered until after signing the Licence Agreement, nothing in the end turned on this. It clearly ratified the contract of sale entered into with Digby. And it had been registered by the time it settled the purchase of the Adjacent Property).
47On 3 April 2013, Digby brought a Magistrates’ Court case against Lanshan. The Complaint pleaded that by the Licence Agreement, the then registered proprietor of the licensor land had granted a licence to use certain car parking spaces on the licensor land to the then registered proprietor of the licensee land. It pleaded that Digby was the wife of the licensee, and the licensee land had passed to her by way of the licensee’s estate on 3 August 2009. It then pleaded that Lanshan is the successor in title to Tullamarine, the licensor who was party to the Licence Agreement, and that the Licence Agreement had been annexed to the s 32 vendor statement provided to Lanshan when it purchased the land.
48At paragraph 8 it pleaded:
The defendant [Lanshan] ratified the licence agreement and agreed to be bound by the licence agreement in an email from the solicitors for the defendant to the solicitors for the vendor of the licensor land, dated 23 November 2012.
49The Complaint went on to plead that, in breach of the Licence Agreement, on about 12 January 2013, Lanshan had erected a fence on the boundary between the licensee land and the licensor land preventing access by the guests and patrons of the business conducted on the licensee land, to the car parking spaces.
50Nearly three months later, on 9 April 2013, Lanshan’s solicitor, Tang, was picked up by Chen at his house, and driven to the Motel Property. He made a handwritten file note which was put into evidence. It is of work done for over two hours, between 10.10 am and 12.30 pm (including travel time); some of which, at least, includes meeting with Chen himself. The file note mentions ‘quality Melbourne hotel (with Tao Chen)’. The Tang file note includes the following:
… came to my house to pick me up plus then drove me to the hotel.
He then showed me around the hotel followed by … me the road access to plus from the hotel of the carparks at the western end of the hotel.
… He also showed me the ‘Bella Vista’ Reception Centre next door plus the fence (Colorbond) erected … the hotel plus the reception centre …
I … many photos plus some video of the hotel, the reception centre (outside), the western end carparks, the road entrance plus exit for the hotel plus the [reception?] and the boundary fence in dispute.
I discussed with the hotel manager, Tiegan Wang, who told me that some neighbours plus hotel patrons complained of the noise produced by the reception patrons and the lack of maintenance and repair of the reception centre. (See reasons attached)
51The ‘attached’ reasons are contained in a handwritten file note states:
Reasons for erecting boundary fence
1. Noise caused by P’s customers has been a constant nuisance to neighbours, … Those guest rooms facing their side (northern) thus affecting D’s bus …
2. D has never blocked access to plus from P’s CP [that is, car park] at the western end. In fact D’s patrons have full access to plus from the CPs [that is, car parks] 24/7 … There is no boom gate or other restrictions to the CPs.
3. D’s patrons … have remained on P’s prop. Smoking, loitering, talking, … which have a negative affect [sic] on D’s customers, feeling nuisance.
52On 22 April 2013, Lanshan filed its Defence in the Magistrates’ Court proceeding. Importantly, given the dispute in this present case, Lanshan admitted the allegations contained in paragraph 8 of the Statement of Claim. In other words, it admitted that it ratified the Licence Agreement and agreed to be bound by it.
53At paragraph 11 and 12 of the Defence in the Magistrates’ Court proceeding, Lanshan said:
11.…
Particulars
The Licence Agreement does not prohibit the Licensor from erecting a side fence on the boundary between the Licensee’s land and the Licensor’s land as alleged by the Plaintiff.
12.The Defendant states that the Defendant has never prevented access to the car parking spaces by the guests and patrons of the business conducted on the Licensee’s land as alleged by the Plaintiff. The Defendant states that the Defendant’s solicitors have informed the Plaintiff’s solicitors that the Plaintiff’s patrons can continue to use the access leading from the Licensor’s land to the car parking spaces in the Defendant’s solicitors’ letter sent by email to the Plaintiff’s solicitors dated 29 January 2013.
54The sale from Digby to F3 was due for settlement on 30 April 2013.
55At trial, Hernandez gave evidence that before F3 settled on the purchase of the Adjacent Property, he believed there was an agreement in place whereby Lanshan had taken over as the licensor, from the original licensor, and F3 had taken over from the original licensee, under the Licence Agreement. (I consider the effect of his evidence to be that he believed that there was an agreement that Lanshan would be licensor – under the terms of the Licence Agreement, as the original licensor had been – and F3 would be licensee – as the original licensee had been).
56On 28 May 2013, F3’s lawyer wrote to Lanshan’s lawyer attaching a Transfer of Licence Agreement. In his email, he advised that he acted on behalf of the purchaser and understood Tang acted for Lanshan. The email continued:
My client’s mortgagee requires a Transfer of Licence Agreement signed by all parties to be provided to enable settlement to proceed. Accordingly, attached for your perusal is the Transfer of Licence Agreement.
I would be pleased if you could advise your acceptance or otherwise of the attached document as a matter of extreme urgency, as settlement has been delayed pending resolution of the matter.
57At trial, Hernandez made clear that F3 would not have settled on the purchase of the Adjacent Property if it did not have use of the Motel Property car park under the Licence Agreement.
58Digby’s new lawyer (Michael Meade of Michael Meade & Associates) then wrote to Lanshan’s lawyer on 30 May 2013. The letter stated:
… We act on behalf of Josephine Digby the proprietor of 267 Mickleham Road, Tullamarine. Our client has contracted to sell this particular property by contract dated 20 December 2012 which contract was due to settle on 30 April 2013.
We advise that the purchaser’s banker requires a Transfer of the Licence Agreement dated 27 September 2001. The purchaser’s banker has retained Gadens Lawyers to act on its behalf. We advise that unless this transfer is settled by all parties including your client, our client’s contract of sale will be frustrated and unable to settle. We are unable to accept this position.
Our client retained Maurice Blackburn Lawyers in relation to litigation against your client which case is listed for hearing on 15 June 2013.
We have unconditional instructions from our client to direct Maurice Blackburn to discontinue and withdraw from those proceedings on the proviso that your client executes the Transfer of Licence Agreement immediately. … The alternative is an application to the Practice Court for an Order that your client execute the Transfer of Licence Agreement given that we hold written evidence that your client acknowledges the validity of the licence agreement. …
59On 30 May 2013, Lanshan’s lawyer sent a letter to Digby’s lawyer which stated:
… We note your client’s offer to discontinue and withdraw the proceedings against our client on conditions our clients signs the proposed Transfer of Licence Agreement and each party bears and pays hers/its own legal costs.
We reiterate our client’s stance that your client has no legal ground to support her claim against our client and that our client will definitely win the case. Having said that, our client is pragmatic and practical and considers that the proposal by your client makes commercial sense and is beneficial to both parties in that it saves unnecessary time and costs.
60The letter went on to state that Lanshan’s lawyer had instructions that provided a written unconditional discontinuance and withdrawal of the Magistrates’ Court proceedings was given, with each party bearing its own costs, and that Lanshan would sign the proposed Transfer of Licence Agreement on terms acceptable to it.
61On 31 May 2013, F3’s lawyer wrote to Lanshan’s lawyer, copying in Digby’s lawyer, and attaching a copy of the Transfer of Licence Agreement executed by both F3 (as purchaser of the Adjacent Property) and Digby (as vendor), and advising an original transfer would be sent to Lanshan’s lawyer’s office via express post for execution by Lanshan.
Transfer of Licence Agreement
62The Transfer of Licence Agreement described Lanshan as the current licensor, Digby as the transferor, and F3 as the new licensee. It stated:
WHEREAS by Agreement dated 27 September 2001 TULLAMARINE AIRPORT MOTOR INN PTY LTD ACN 006 053 36 (‘the Licensor’) the registered proprietor of the property know [sic] as 265 Mickleham Road, Tullamarine being the land more particularly described in Certificate of Title Volume 5768 Folio 498 (‘the Property’) and JOSEPH CHARLES DIGBY (‘the Licensee’) the registered proprietor of 267 Mickleham Road, Tullamarine being the land more particularly described in Certificate of Title Volume 9485 Folio 992 upon which is constructed a building known as Bella Vista Reception Centre the Licensor allocated to the Licensee subject to the terms of a Licence Agreement dated 27 September 2001 (‘Licence Agreement’) certain car parking facilities on the Property of the Licensor and the right of ingress and egress over the Property of the Licensor for the use and benefit of the Licensee and his patrons and guests.
AND WHEREAS the Current Licensor is the registered proprietor of the Property and the Transferor by Contract of Sale dated 20 December 2012 has sold to the Licensee all her estate and interest in the land more particularly described in Certificate of Title Volume 9485 Folio 992 upon which is constructed a building known as Bella Vista Reception Centre AND THE PARTIES HERETO hereby agree to transfer the Licence Agreement to the New Licensee.
63Lanshan’s lawyer wrote to Digby’s lawyer on 3 June 2013 at 10.36 am saying:
I have received the signed Transfer of Licence Agreement today. Subject to my receipt of the following documents I will arrange with my client to sign the Transfer of Licence Agreement:
1. Notice of Discontinuance signed by your client;
2. Current public liability insurance policy and receipt for payment of the insurance policy premium for the carpark taken out by the transferee.
64There is a file note in evidence of Tang, indicating that he spoke to Chen and told him that Digby’s lawyer had sent a letter saying that if he signed the Transfer of Licence Agreement she would instruct her solicitor to withdraw the Magistrates’ Court proceedings. The file note indicates clearly:
He said he agreed to sign to the Transfer of Licence Agreement.
65There is a further file note about 15 minutes later that Tang spoke to Chen and told him that Digby’s offer involved each side paying their own legal costs and ‘he accepted’.
66Later that day, at 6.18 pm, Lanshan’s lawyer wrote to Digby’s lawyer, stating:
It does not make sense to me that the licensee cannot take out the insurance simply because the motel and the carpark [are] on the same title. The licensee has a proprietary right to use the carpark under the licence agreement and so, similar to a tenant under a lease of strata titled property, can surely take out insurance to protect the licensee’s interest. Conversely, because my client has parted with the possession and use of the carpark to the licensee, my client’s insurer will not cover the carpark. So if any accident happens on the carpark, there will not be insurance cover and my client will bear the sole risk. My client requires the insurance policy and receipt for payment of insurance premium to be provided before signing the transfer of the licence agreement. Please also note that the policy must have my client’s interests as well as my client’s mortgagee’s interest endorse [sic] on it.
67Digby’s lawyer emailed in reply:
I advise that the carpark is unable to be separately insured with respect to public liability given that the motel and the carpark are on the same title. This has been previously investigated and addressed by me with the predecessor in title of the motel freehold.
68There was a file note in relation to a discussion about insurance between Tang and Meade on 11 June 2013. It noted that Digby and the transferee could not get an insurer to insure the car park for the transferee. Tang’s file note indicates he then made a phone call to Chen in which he told him about the conversation with Meade, and Chen said he would sort it out with the transferee later. Tang’s file note said he told Chen that insurance must be taken out urgently, that he would be responsible for liability, and suggested he ask his insurer to make the transferee a beneficiary. The note says that Chen said ‘okay’.
69On 12 June 2013, Lanshan’s lawyer, Tang, and Digby’s lawyer, Meade, had a conversation, which Tang confirmed in an email:
Have you received the draft Deed of Indemnity from V M Roccisano yet?
As spoken today, we will deal with the matter by way of cross undertakings between you and I. I will undertake to send the Transfer of Licence Agreement signed by my client to you, and you will undertake to send the Deed of Indemnity signed by the purchaser to me and to file the Notice of Discontinuance signed by Maurice Blackburn on behalf of your client … before tomorrow’s hearing.
70Meade replied:
I have received your email of 12 June 2013 and I acknowledge that you have precisely identified the current position in this matter. I undertake to file the Notice of Discontinuance by fax with Broadmeadows Court before 4pm today. I accept your undertaking to forward the Transfer of Licence Agreement upon your receipt of the Deed of Indemnity signed by the purchaser.
71On the same day, F3’s lawyer wrote to Digby’s lawyer, copying in Lanshan’s lawyer, attaching an indemnity agreement. Under the indemnity agreement, on the basis insurance could not be taken out prior to settlement in relation to the car park, F3 agreed to unconditionally indemnify Lanshan against any damage incurred in relation to issues relating to public liability associated with the use of the car park at the rear of the Motel Property by the guests and customers at the Adjacent Property. The indemnity was to endure until insurance was capable of being effected over the car park, noting the interests of Lanshan and its mortgagee.
72On 13 June 2013, a Discontinuance Notice in relation to the Magistrates’ Court proceeding was sent by Digby’s lawyer to Lanshan’s lawyer.
73Chen signed the Transfer of Licence agreement for Lanshan, and Lanshan’s lawyer forwarded it.
Settlement of Adjacent Property and subsequent events
74On 17 June 2013, F3’s lawyer confirmed that settlement of the Adjacent Property was effected on 14 June 2013.
75Two weeks later, on 28 June 2013, F3 leased the Adjacent Property to Azooba Pty Ltd (Azooba).
76Hernandez gave evidence that Azooba was using the car park from ‘day one’ of its lease of F3’s site. There is a photo in evidence showing how the driveway ran from the function centre, where cars turned left at a brick pillar and then followed an arrow to the back of the motel. There are also photos showing signs, located on both properties, directing customers of Azooba to the car park. Hernandez gave evidence that the signs had been there since June 2013.
77On 19 July 2013, F3’s lawyer wrote to Lanshan’s lawyer, providing it with a copy of the public liability insurance certificate of currency for the Adjacent Property ‘showing the endorsements in relation to the carpark’. He asked for confirmation the cover was in order.
78On 23 July 2013, Lanshan’s lawyer replied to F3’s lawyer saying he had forwarded the request to his client for instruction, and stating:
The certificate of currency has some errors requiring amendments as follows:
1. Policy endorsement: the address should be 265 not 267;
2. Interest parties: the name should be ‘Lanshan Pty Ltd’.
79There is no evidence as to what insurance was in place for the next few years (and insurance at that time is not an issue in the case).
80On 9 August 2013, F3’s lawyer wrote to Lanshan’s lawyer, referring to a conversation he had with him on 30 July 2013, and stating:
… wish to advise that my client wishes to pay the licence fee for the next 95 years to your client.
I would therefore be pleased if you could provide details of the person to whom the said cheque is to be paid and where my client is required to deliver the said cheque.
81However, Lanshan’s lawyer responded to the letter from F3’s lawyer on 9 August 2013:
In reply to your client’s offer to pay the whole of the licence fees now, I am instructed to inform you that my client will follow the time schedule for payment of the licence fees as provided in the licence agreement.
82On 16 August 2013, F3’s lawyer wrote to Lanshan’s lawyer, providing him with a corrected public liability insurance certificate of currency. The policy attached was dated 5 August 2013, noted the policy holder address at the Adjacent Property, and noted in the policy endorsement that:
The Legal Liability section cover of this Police is amended to note
The designated car parking area located at the rear of:
(1) 265 Mickleham Road, Melbourne, VIC, 3000
Whilst being used by guests of Bella Vista Reception Centre
…
83Under ‘Interested Parties’, it noted ‘OWNER: LANSHAM [sic] PTY LTD’.
84On 4 September 2013, F3’s lawyer wrote to Lanshan’s lawyer referring to the issue of the licence fee of $1 that Lanshan wished to receive annually. The letter asked for advice as to whom and where the licence fee was to be paid.
85Lanshan’s lawyer responded on 12 September 2013:
Please inform your client to pay for the $1.00 licence fee to my client at my client’s motel next door.
86Hernandez gave evidence regarding payment the licence fee on behalf of F3 (that his wife attended to it).
87On 17 September 2013, F3’s lawyer sent a letter to Lanshan’s lawyer complaining that F3 had instructed him that recently Lanshan had advertised for parking availability in the car park at a low rate, and the car park had been totally full, so F3 had not been able to use it under the Licence Agreement whatsoever. It asked that Lanshan allow:
a certain amount of car park spaces to be used exclusively for my client if your client insists on using the car park in such a manner.
88On 8 October 2013, the transfer of the Adjacent Property from Digby to F3 was registered.
89On 15 October 2013, F3’s lawyer wrote to Lanshan’s lawyer saying he had not received a reply to his letter of 17 September, and noted his client’s instructions that, contrary to the Licence Agreement, Lanshan was closing the gates at approximately 11 pm and locking some of F3’s patrons in the car park. It said that this practice needed to be ceased, failing which proceedings would be issued for breach of the Licence Agreement.
90Lanshan’s lawyer responded on 17 October 2013 denying that his client closed the gate at 11 o’clock every night, and saying that in the future Lanshan would inform F3 if Lanshan was to the close the gate under exceptional circumstances, and otherwise F3 ‘can expect the gate to be opened’. The letter went on:
… we are instructed that our client has the right to use all the car parks itself, subject to the right of your client’s patrons under the licence agreement to use the carparks in the Western end of our client’s hotel. We are instructed that our client has been using the carparks in accordance with the terms of the licence agreement.
91On 4 November 2013, Lanshan’s lawyer sent a letter to F3’s lawyer. It stated:
Despite our advice that our client denied the illegality of the boundary fence … we are instructed that your client has sent some people to demolish and remove the whole boundary fence on … 1 November 2013. We are also instructed that you have sent a letter to the local police station informing them that the fence was illegal and was causing your client’s tenant to suffer financial loss … Our client has considered seeking a mandatory injunction requiring your client to reinstate the boundary fence.
92On 19 November 2013, F3’s lawyer wrote to Lanshan’s lawyer saying he had now received further instructions and it was quite clear that Lanshan had breached the Licence Agreement in erecting a fence on the boundary, where it is clear the said fence ‘cannot be erected’. He referred to the plan attached to the Licence Agreement showing cars had passed over the boundary and, therefore, a fence could not possibly be erected at this point. He demanded that Lanshan’s lawyer inform his client to remove the fence or Supreme Court proceedings would be issued.
93On 20 November 2013, Lanshan’s lawyer wrote back to F3’s lawyer:
Your allegation that there cannot be a boundary fence simply because the cars of the patrons of your client’s tenant need access to the car park at the rear of our client’s property is made without justification. The cars can still enter to the car park even with a boundary fence. The drawing only shows an opening between your client’s property and our client’s property, which presumably is to be used as access for the cars. In any event, the cars may enter to the car park through the main entrance of our client’s property. We have already informed you that the boundary fence was already there when our client purchased the property, which was before your client’s purchase of its property.
The fact is that your client has already unilaterally demolished the boundary fence despite our client’s stern objection. The fence now is only a temporary fence erected by our client’s contractor.
We are instructed that pending for the resolution of the matter after our client’s designer has obtained all the relevant documents and information from Hume City Council, our client has already opened up two areas in the fence as access for the cars of the patrons of your client’s tenant. …
Regarding your client’s threat to claim for loss of rent against our client, our client denies that your client has the right to do so. Our client takes the view that your client’s tenant has no right to withhold payment of rent. …
94On 27 November 2013, Lanshan’s lawyer wrote to F3’s lawyer confirming his client had removed two sections of the temporary fence to allow access for his client’s customers, but requiring F3 to reinstate the permanent fence, which it said had been illegally demolished.
95The letter went on to complain that F3’s customers were still parking their cars at the car parking spaces reserved for hotel patrons, which had caused Lanshan to suffer financial loss. The letter said that from then on, all unauthorised vehicles would be towed away without further notice.
96On 2 December 2013, F3’s lawyer wrote to Lanshan’s lawyer saying Lanshan had failed to take down the fence to the extent it was shown on the plan.
97On 3 December 2013, Lanshan’s lawyer wrote back saying:
We are instructed that our client has made two openings in the temporary fence, one near the entrance and the other at the end of your client’s property as shown on the plan.
98On 11 February 2014, Lanshan’s lawyer wrote to F3’s lawyer. He said:
We are instructed that one of the conditions of the planning permit allowing the use of our client’s premises as a hotel reception and restaurant requires the provision of over 100 carparking spaces. Therefore, the licence agreement granting your client’s right to use the carpaaking [sic] spaces at the western end of our client’s premises must be read and construed in conformity with, but not contrary to, the conditions of the planning permit pertaining to the use of our client’s premises.
Accordingly, we are instructed to inform your client that if we do not receive [a reply] within seven (7) days…our client will assume that your client agrees to the use of the western end car parking spaces by both your client and ours in compliance with the conditions of the planning permit pertaining to our client’s use of the hotel.
99On 20 August 2014, F3 commenced proceedings in VCAT against Lanshan, seeking an order that Lanshan remove the fence, which it said had been erected in breach of the Licence Agreement.
100On 14 October 2014, Lanshan brought a counter proceeding in VCAT against F3. The application was signed by Jack Chen, Chen’s brother. It referred to the fence dispute.
101On 21 October 2014, Jack Chen sent a letter to the Tribunal, under Lanshan’s letterhead. He sought the Tribunal’s consent to the application to amend the application as follows:
1.Under ‘Claim Details’ section, add ‘Review, vary or cancel a contract’. The contract referred to being the Licence Agreement dated 27 September 2001 …
2. Under the ‘Describe the dispute’ section, add the following:
(1)The Respondent has breached Clause 3 of the Licence Agreement in that the Respondent has damaged the boundary fence by completely demolishing it despite the Applicant’s strongest objection to it.
(2)A declaration by the Tribunal that the Applicant shall provide 15 to 45 car spaces for the use of the Respondent’s patrons pursuant to the Delegation Report dated 22 July 1997 …
(3)Variation of the Licence Agreement by specifying the number of car spaces that the Applicant shall make available for the Respondent’s use to be between 15 and 45 and the location of the 15 to 45 car spaces to be towards the end of the western car park and by marking the plan attached to the Licence Agreement accordingly.
102On 25 November 2014, there was a compulsory conference before a Deputy President of VCAT in the two proceedings. On 1 December 2014, Lanshan’s lawyer wrote to VCAT enclosing proposed consent orders which he said reflected the agreed settlement of the proceedings the parties had reached at a compulsory conference. It referred to car parking spaces being provided by Lanshan ‘in accordance with the area outlined in the attached plan’. It said that plan ‘shall be attached to the Licence Agreement for car parking dated 27 September 2001 and as transferred on the 13th June 2013’. (F3 submits that it appears that consent orders had not been finalised).
103On 16 March 2015, Lanshan wrote to F3. The letter was signed by Chen as director of Lanshan. The letter stated, relevantly:
We refer to the Licence Agreement made between our respective predecessors-in-title on 27 September 2001 and note that the Licence Agreement prescribes and limits the use of 267 Mickleham Road as a Reception Centre. We also note that you have been and still are using the 267 property as a Restaurant.
Pursuant to Condition 6 of the Licence Agreement, we now formally notify you that you have been and still are in default of the Licence Agreement … unless you shall remedy the default … within 14 days from the date of service of this notice on you, we shall determine the Licence Agreement forthwith without further notice to you.
104Lanshan followed this up with a letter dated 2 April 2015, saying that due to the failure to remedy the default, ‘the Licence Agreement shall determine forthwith’. It went on to say that F3 no longer had the right to use the car parking spaces on the western end of the Motel Property, and if anyone entered it would be trespass. Again, Chen signed the letter.
105On 6 May 2015, Hume City Council resolved to grant a permit for the Adjacent Property to be used as a restaurant, with certain conditions. Lanshan sought a review of that decision.
106On 14 August 2015, F3’s lawyer wrote to Lanshan’s lawyer, saying that Lanshan was acting in breach of the Licence Agreement by locking ‘the gates to the property and restricting access to [F3’s] tenant to the area’.
107On 17 August 2015, Lanshan’s lawyer replied, ‘We are instructed that the gate is open’.
108On 17 March 2017, Sam Rush (from the Hume City Council) wrote to Richard Siedlecki (also from the Council), stating relevantly:
Confirming my advice from this morning regarding outstanding issues for car parking in relation to the restaurant and motel.
I have arranged to meet with Roberto on site and requested that he undertake the following Remedial works in relation to the car park:
Remove, compact and reinstate the damaged areas and potholes in the brick paved access way; Redo the line marking and include the required disabled car parking bay; Put in some solar lights to have some illumination at night for identification and safe pedestrian movement.
Insured reduce the amenity issues by making the car park visible and attractive.
I advised that I will have the planning permit and the license agreement and go over the obligations on site with him.
I advised that our opinion was that the maintenance obligations were as discussed this morning and ultimately with him which has been accepted.
I also suggested he may wish to discuss this issue with his consultant.
I have also suggested that he advise the Chinese company of the impending works as a matter of courtesy.
…
109Asked about that email, Hernandez (the ‘Roberto’ referred to) recalled that it was an accurate summation of the conversation that he had with Sam Rush.
110Hernandez gave evidence that F3 installed a double solar light, at a cost of about $27,000, in addition to completing stormwater drainage works around the car park, at a cost of about $21,500.
111On 26 April 2017, the Hume City Council indicated it had decided to grant a permit for use of the Adjacent Property for the purpose of a function centre and restaurant. It provided, as condition number 16:
The car parking area at the western end of the abutting motel site must be resurfaced to the satisfaction of the responsible authority within 12 months of the issue date of this permit.
112Importantly – given the issues in this case – condition 27(c) provided that the permit will expire if:
The License Agreement dated 27 September 2001 between the owners of 265 and 267 Mickleham Road, Westmeadows lapses or is ended.
113On 27 November 2017, a VCAT hearing occurred, with VCAT handing down its decision on 8 January 2018: Lanshan Pty Ltd v Hume CC [2018] VCAT 38. It decided to amend the permit application to allow use of the Adjacent Property as both a function centre and as a restaurant. A planning permit was issued on 8 January 2018. (This was substantially on the same basis as the permit granted two years earlier). Conditions attached to the permit included:
22A minimum of 60 car parking spaces at the western end of the abutting motel site as shown on the endorsed plans must be resurfaced to the satisfaction of the responsible authority within one year of the permit applicant confirming that the permit is being acted on pursuant to condition 3.
…
31 The permit will expire if:
…
(c)The Licence Agreement dated 27 September 2001 between the owners of 265 and 267 Mickleham Road, Westmeadows lapses or is and there is no comparable licence agreement entered into to provide for the ongoing use of a minimum of 60 car parking spaces on the land at 265 Mickleham Road.
114Hernandez gave evidence that he estimated that the VCAT process cost F3 between $120,000 and $150,000.
115F3 then took steps to resurface the car park, which Hernandez estimated cost between $15,000 and $25,000 to complete, including repainting lines on the car park, at a cost of about $3000.
Default Notice
116By 5 September 2019, Lanshan had new lawyers acting for it (Mahons with Yuncken and Yuncken). Mahons wrote to F3’s lawyer, referring in their letter to Lanshan as licensor, and F3 as licensee. The letter stated:
1.On 27 September 2001, Tullamarine Airport Motor Inn Pty Ltd (the then registered proprietor of the Property) granted a car parking licence (Licence) to Joseph Digby for a term of 99 years (Licence Period) in consideration of the payment to the Licensor a licence fee of $1.00 per annum (Licence Fee).
2. On or about 7 February 2013, the Licensor acquired the Property from Tullamarine Airport Motor Inn Pty Ltd.
3. By a Transfer of Licence, dated 13 June 2013, the Licence was transferred by the Licensor (as owner of the Property) to the Licensee.
4. The Licence provides, inter alia:
(a)the allocation ‘to the Licensee subject to the terms of this Agreement certain car parking facilities on the Property’ (Spaces). The ‘certain car parking facilities’ purportedly allocated by the Licensor have not been identified on the plan attached to the Licence (Plan);
(b)‘the right of ingress and egress over the Property of the Licensor for the use and benefit of the Licensee and his patrons and guests’. The area to which the purported ‘right of ingress and egress over the Property’ is not identified on the Plan;
(c)the licenced area is described in the Licence as ‘those car parking spaces at the western end of the Property identified on the plan annexed to the Licence’, (Licenced Area). Comprised in the Licenced Area are the Spaces which are not identified on the Plan;
(d)during the Licence Period the Licensee agreed to pay the Licensor the Licence Fee;
(e)‘the Licensee shall maintain the carparking spaces in good order and condition and shall indemnify the Licensor for any damage done to the car parking spaces’;
(f)‘the Licensee shall maintain a public liability insurance policy with respect to the car parking area to a sum not less than $10 million’ (PL Insurance);
(g)the Licence shall be determined if the Licensee fails to remedy any default of the Licensee’s obligations under the Licence within 14 days of receiving from the Licensor a notice of default (Notice);
(h)‘the Licence does not confer or constitute possession or occupation of the Property’; and
(i)time is of the essence in relation to compliance by the parties of their respective obligations under the Licence.
5. Wrongfully, and in breach of the terms of the Licence (Wrongful Conduct), the Licensee or its agents, contractors or servants have:
(i)installed a security camera in the Licensed Area (Security Camera);
(ii)installed a street light in the Licenced Area (Street Light);
(iii)vandalised the Licenced Area by spray painting it with words including but not limited to ‘Tow Away’ (Vandalism);
(iv)installed signage within the Licensed Area or its surrounds, including but not limited to warning signs for ‘My Spy Security Cameras’ (Signage);
(v)during the Licence Period, failed to maintain the requisite PL Insurance; and
(vi)removed approximately twelve trees (Trees) from the Licenced Area including:
(i)four Fraxinux ornus;
(ii)four Corymbia maculate; and
(iii)four Curpressus leylandii ‘Leyton Green’.
6. The Wrongful Conduct is in breach of the Licensee’s obligations under the Licence and has not been consented to by the Licensor.
7. By engaging in the Wrongful Conduct, the Licensee has evinced an intention to no longer be bound by the terms of the Licence.
117The letter went on to say the licensee had repudiated the Licence Agreement and by this letter the licensor accepted it. Alternatively, it said the breaches had to be remedied. It also sought evidence that the licence fee had been paid and public liability insurance maintained, and wanted trees replaced.
118On 3 October 2019, Lanshan’s lawyer sent another letter, stating:
We advise that pursuant to clause 6 of the Licence, as 14 days has elapsed since you received the Notice (constituted by our letter dated 5 September 2019) without any attempt by the Licensee to remedy the ongoing breaches of the Licence (as detailed in this Notice), we confirm that the Licence was terminated on 20 September 2019 (Termination Date).
We confirm that the Licensee has failed to:
(a)remove the Security Camera, the Street Light and Signage;
(b)remediate the damage to the Licensed Area caused by the Vandalism;
(c)provide satisfactory evidence that the requisite PL Insurance has been maintained during the Licence Period;
(d)replace the Trees; and
(e)rectify the Wrongful Conduct.
With the termination of the Licence the Licensee (and its patrons and guests) have no entitlement to access the Licensed Area other than as trespassers. The Licensor in exercising its rights as the owner of the Property intends:
(i)closing the opening in the fence separating the Property from 267 Mickleham Road West Meadows (No. 267);
(ii)removing the Signage and repairing the damage caused to the Licensed Area by the Vandalism;
(iii)removing the Security Camera and Street Light which will be deposited onto No. 267;
(iv)placing signs at both entrances to the Licensed Area advising that the “patrons and guests” of the Licensee are not permitted to enter the Licensed Area without the permission of the Licensor, and to do so (without such permission) will be as trespassers; and
(v)instituting proceedings against the Licensee to recover the cost of:
(A)replacing the Trees;
(B)rectifying the Wrongful Conduct.
119On 24 December 2019, Lanshan served the Writ in this proceeding.
120And with that detailed explanation of events, I turn now to the issues in dispute.
ISSUES
121The pleadings in this case raise complex issues. The parties filed a joint list of issues, amended as the trial progressed. Those issues are set out below, with my answers to the questions posed in them following.
1.0. INTRODUCTORY ISSUES
1.1. Is the Licence Agreement a lease?
122Yes, it is a lease of the car parking area.
123Lanshan argues that the Licence Agreement is in fact a lease in relation to the car parking area, and as such it contravenes the Subdivision Act 1988 (Vic) (Subdivision Act).
124There was no dispute that the Licence Agreement also provides a licence so far as ingress and egress over driveways on the Motel Property is concerned – see clause 1 of the Licence Agreement, which has the effect of licencing the licensee to permit the patrons and guests the right of ingress and egress over the driveways of the Motel Property for the purpose of accessing the car parking area.
125For the reasons that follow, the Licence Agreement is properly characterised as a lease in relation to the car parking area, but it does not contravene the Subdivision Act.
126I will deal with the characterisation question first.
127Clause 1 provides, relevantly:
The Licensor hereby grants to the Licensee at all times during the continuance of this licence and authorises the Licensee to permit his guests and patrons to use to the exclusion of all others the car parking spaces and facilities being those car parking spaces at the western end of the Property ….
128The parties agreed that the correct way to interpret that first part of clause 1 is to read it as if the parentheses included below were inserted:
The Licensor hereby grants to the Licensee at all times during the continuance of this licence (and authorises the Licensee to permit his guests and patrons to) use to the exclusion of all others the car parking spaces and facilities being those car parking spaces at the western end of the Property ….
129Although still not entirely grammatical, reading it in this way emphasises that it is the licensee being granted exclusive use of the car parking spaces and facilities, which he can then permit his guests and patrons to use. This is consistent with the Recital to the Licence Agreement, which sets out that the licensor desires to allocate to the licensee certain car parking facilities ‘for the use and benefit of the Licensee and his patrons and guests’.
130The defining feature of a lease is exclusive possession. This is so irrespective of the fact that an agreement may not necessarily include the words ‘lease’, ‘lessor’ or ‘lessee’ within its terms; but rather, use terminology more traditionally deployed in a licence agreement (e.g. ‘licence’, ‘licensor’ and ‘licensee’): Radaich v Smith (1959) 101 CLR 209, 214 (McTiernan J); 217-218 (Taylor J); 220 (Menzies J); 222-223 (Windeyer J).
131I am satisfied that the Licence Agreement confers exclusive possession of the car parking area (the car parking spaces at the western end of the Motel Property and the car parking facilities), to the licensee ‘at all times during the continuation’ of the Licence Agreement (see clause 1). The licensee has ‘use to the exclusion of all others’: what else can that mean, but exclusive possession?
132That the licensee has exclusive possession is supported by other clauses of the Licence Agreement. Clause 3 requires the licensee to maintain the car parking spaces in good condition and order, and to indemnify the licensor for damage done in certain circumstances. By clause 4, the licensee is required to maintain public liability insurance with respect to the car parking area.
133Lanshan argues that an indefinite class of people is entitled to enter the land to use car parking (guests and patrons when the licensee permits), rather than specific persons. That is so; but those others can only enter if the licensee permits). It is the licensee who has exclusive possession.
134In Federal Airports Corporation v Makucha Developments Pty Ltd (1993) 115 ALR 679 (Makucha), Davies J considered a similar agreement. It too was described as a ‘licence agreement’. In contrast to the Licence Agreement in question here, the Makucha agreement provided that the rights it created were contractual only and did not create any tenancy or estate or interest whatsoever in or over a car park, such that the rights of the grantee were those of a licensee only; and it provided that the agreement conferred no rights of exclusive occupation of the car park. However, Davies J held that the licence agreement there had to be read in context, and that the overriding intent and operation of the agreement was to give the licensee what was, in effect, an exclusive right to use and occupy the land for the purposes of a car park. This was because the ‘intended use [would] occupy the whole or substantially the whole of the land to the virtual exclusion of any other use’. So the agreement was properly to be treated as a lease.
135Davies J’s reasoning is applicable in this context. The Licence Agreement, by its terms, grants to the licensee, the exclusive use of the allocated car parking spaces. The language conferring exclusive possession is express. The objective intention of such language is that the grant is to operate to the exclusion (or virtual exclusion) of any other use.
136Lanshan seeks to distinguish Makucha, on the basis that there, the licensee had rights to occupy a single tract of land to build and operate a car park, but that although it was acquired for that purpose the licensee was not bound to use it for that purpose. I reject that submission. The Makucha agreement specifically refers, at clause 6.2, to the relevant licensee having the right to use the relevant land ‘solely for the parking of cars and for the courtesy bus service and for no other use or purpose...’: see Makucha at 688.
137Lanshan submits that the Licence Agreement does not contemplate sub-tenancies. However, that does not mean it is not properly characterised as a lease. Leases do not have to refer to sub-tenancies to be leases.
138Lanshan refers to clause 7 of the Licence Agreement to further its argument that exclusive possession is not granted by the Licence Agreement. That clause states:
This Licence does not confer or constitute possession or occupation of the Property within the meaning of the Sale of Land Act 1962.
139But this clause is directed, not just to the car parking area, but to the entirety of the Motel Property (per the definition of ‘Property’ in the Recital to the Licence Agreement). As such, its objective intention is to make clear that the Licence Agreement does not provide for possession or occupation of the whole of the Motel Property – within the meaning of those words in the Sale of Land Act 1962 (Vic). As F3 submits:
“possession or occupation” is a phrase found in the definition of a “terms contract” within the Sale of Land Act 1962 (Vic). Under that Act, a terms contract means, inter alia, a sale contract under which the purchaser is entitled to possession or occupation of the land before the purchaser is entitled to a conveyance or transfer of the land. Thus, the intention of clause 6 is to foreclose any argument that, in the event the Property is sold to the licensee, the contract of sale is a terms contract.
140In my view, it follows that, on a proper construction, the Licence Agreement is a lease insofar as it concerns the car parking area.
141Finally, on this point, Lanshan argues that if the Licence Agreement is a lease, it is a retail tenancies lease, and so VCAT would have jurisdiction to deal with it, under s 89 of the Retail Leases Act 2003 (Vic) (Retail Leases Act), not the County Court. I reject this jurisdiction submission, which was only raised in final submissions. The car park does not fall within the definition of ‘retail premises’ for the purposes of the Retail Leases Act. It was not used wholly or predominantly for the sale or hire of goods by retail, or for the retail provision of services: see definition at s 4(1)(a) of the Retail Leases Act.
1.2. If ‘yes’ to (1.1), is the Licence Agreement void by reason of section 5(1) of the Subdivision Act 1988 (Vic)
142No.
143Section 5(1) of the Subdivision Act provides:
Subject to sections 4 and 44, the subdivision or consolidation of land, or the creation, variation or removal of an easement or restriction, or the creation of common property, or any dealing with common property, must be done in accordance with this Act.
144‘Subdivision’ is defined in s 3 of the Subdivision Act to mean ‘the division of land into two or more parts which can be disposed of separately’.
145Lanshan submits that the circumstance of a lease on the terms of the Licence Agreement would have constituted a subdivision within the meaning of the Subdivision Act, arguing:
A lease of one or several parcels of land together as a single parcel may not divide that parcel of land. However, a lease of a defined fraction of Torrens land would have the effect of demising part of the parcel and making it possible to dispose of the land separately.
146I do not accept this submission. The lease does not amount to a subdivision of land. Leasing part of a parcel of land does not mean it can then be disposed of separately in the sense contemplated by the Subdivision Act.
147A lease is not an easement. Nor is it a ‘restriction’ as defined in the Subdivision Act to mean ‘a restrictive covenant or a restriction which can be registered, or recorded in the Register under the Transfer of Land Act 1958’. ‘Restriction’ has been held to be a reference to restrictions created under the Subdivision Act on a plan of subdivision: Brighton Foreshore Association Inc v Bayside City Council [2021] VSC 26 at [49].
148Further, as F3 submits:
42.… section 5(1) of the Subdivision Act is subject to section 4(4A), which provides that the Act “does not apply to an encumbrance unless the encumbrance constitutes an easement or a restriction.” When read as a whole, it is evident that the word “encumbrance” in the Subdivision Act includes a lease. Thus, s 22(1)(c)(i) of the Subdivision Act provides that in the case of a master plan there must be consent from “each of the persons listed in subsection (1A) whose encumbrance mentioned in that subsection relates to the land in the first stage” (emphasis added). Similar cross-references to the encumbrance mentioned in subsection (1A) are found in sections 22(c)(ii), 22(d)(i), 22(d)(ii), 22(da)(i) and (ii). In turn, subsection (1A) then sets out the persons who are “listed persons” for the purposes of the above-mentioned sections and includes at paragraph (d) of that subsection: “a person whose mortgage, annuity, caveat, lease or sub-lease was lodged before the lodging of the plan” (emphasis added).
149Lanshan submits that contravening s 5 would have had the consequence that the purported subdivision (and hence the lease of the land) is of no effect. I reject that submission. Nor would I accept that that is the consequence of s 5, in any event.
1.3. Is the Licence Agreement void for uncertainty?
150No.
151Lanshan submits that the Licence Agreement is void for uncertainty in that it is ‘incomplete’, in that the description of the ‘lots that were to be the subject of the licence was vague or illusory’ and the boundaries of the car parking spaces are not clearly identified, or able to be ascertained. It says it is not clear which part of the Motel Property is the subject of the Licence Agreement.
152I reject that submission.
153Clause 1 of the Licence Agreement provides:
The Licensor hereby grants to the Licensee at all times during the continuance of this licence and authorises the Licensee to permit his guests and patrons to use to the exclusion of all others the car parking spaces and facilities being those car parking spaces at the western end of the Property identified on the plan annexed to this licence. The Licensor hereby licenses to the Licensee to permit the patrons and guests of the Licensee the right of ingress and egress over the driveways of the Property for the purpose of accessing the said car parking facilities as identified on the said plan.
154The relevant part of the annexed plan (in the copy of the Licence Agreement in evidence at trial) shows this:
155I mention what is shown in the copy of the Licence Agreement in evidence, because only electronic copies of that Licence Agreement were produced – which were clearly photocopies of the original with some deterioration in quality of print. That version appears to be what Lanshan and F3 were provided with. A clearer, higher definition copy of the same plan was produced when an application for a permit to operate the Adjacent Property as a restaurant was sought in around 2015. The one change to the plan on the higher definition version attached to the later application appears to be changing the words in the top right hand corner from ‘PROPOSED RECEPTION’ (per the plan annexed to the Licence Agreement) to ‘PROPOSED RESTAURANT’. I am satisfied on the balance of probabilities that a copy of that clearer version was annexed to the original Licence Agreement executed by Tullamarine and Joseph Digby:
156However, the relevant version I need to consider in determining if the Licence Agreement was void for uncertainty (in the context of this dispute) is the photocopied version annexed to the Licence Agreement which Lanshan and F3 were provided with, and which was what they were considering when the Transfer of Licence Agreement was signed.
157I am satisfied that the description of ‘those car parking spaces at the western end of the Property’, together with the plan annexed to the Licence Agreement sufficiently identifies the relevant car parking spaces the licensor is permitted to use. It indicates 105 marked car parking spaces to the western end of the Motel Property.
158Clause 1 provides for use of the car parking spaces and facilities, and access to the driveways of the Property ‘for the purpose of accessing the said car parking facilities’. Clause 4 requires the licensee to maintain a public liability insurance with respect to the ‘car parking area’. I consider that the ‘car parking area’ is a reference to both the car parking spaces, and the ‘facilities’ (the ‘facilities’ being the roadway between the car parking spaces). It is the area marked in red by F3’s counsel on the image below:[1]
[1]This image is taken from the higher definition copy of the plan, mentioned above.
159If the language used in a key term or terms of a contract is so obscure, imprecise and/or vague as to be incapable of precise or definite meaning (leaving a court unable to attribute a particular contractual intention to the parties) a contract may be found to be void for uncertainty. However, a court faced with vague provisions in a contract, will look to discern a sensible meaning from the language used. Where the contract contains contradictory language or provisions, the court will look at the contract as a whole to ascertain the parties’ objective intentions. It will seek to give effect to those intentions by interpreting imprecise language in a sensible rather than irrational way.
160For Lanshan to succeed in its contention, it would need to establish that the language used in the Licence Agreement relating to the car parking spaces and facilities is so obscure and incapable of any precise or definite meaning that the Court is unable to attribute to the parties any particular contractual intention, such that one of the Licence Agreement’s essential terms has not been agreed upon.
161I am not satisfied of that.
162I agree with F3’s submissions about why Lanshan’s claim the agreement is void for uncertainty should not be accepted, in particular, the following:
47.First, the authorities make plain that it is a very difficult argument to put that a commercial contract is void for uncertainty. If the court comes to the conclusion that the parties intended to make a contract, it will if possible give effect to their intention no matter what difficulties of construction arise. Arguments about uncertainty are hardly ever successful except in cases where the promises are almost illusory.[2]
48.Here, Lanshan and F3 intended to make a contract: they executed a document in which they “agreed to transfer the Licence Agreement to [F3]”, and they then performed the respective obligations of Licensor and Licensee under the Licence Agreement (as to which, see, e.g., paragraph [130] below). In turn, the subject matter of the Licence Agreement — “those car parking spaces at the western end of the Property identified on the plan annexed to this licence” — is not illusory: it is not missing from the agreement, nor is it left to be defined at the discretion of a party, nor is it left to future agreement.
49.Second, there is a distinction between an agreement that is void for uncertainty and a finding that contractual language is ambiguous. A contract of which there can be more than one possible meaning is not therefore void for uncertainty; as long as it is capable of a meaning, it will ultimately bear that meaning which the court decides is its proper construction. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. So long as the language employed by the parties is not so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention, the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements.[3]
50.Here, the critical phrase is: “those car parking spaces at the western end of the Property identified on the plan annexed to this licence”. In no way can that phrase be described as “so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention”. Indeed, one could go so far as to say the phrase doesn’t contain any ambiguity at all.
51.The plan identifies car parking spaces at the western end of the property that are physically separate from other car parking spaces on the property. Consistent with this interpretation, there are driveways marked on the plan allowing for ingress and engress from those same car parking spaces at the western end of the Property.
52.As well, the surrounding circumstances to the agreement shows that the parties intended for the agreement to cover the car parking spaces that were at the western end of the Property and were fenced off from the motel business on 265 Mickleham Rd. The evidence of Mr Hernandez is that the car park was behind a mesh fence that physically separated the Car Park from the rest of the motel on 265 Mickleham Rd, and that the fence had been there since before F3 purchased 267 Mickleham Rd and was there at the time the Transfer of Licence Agreement was signed. A driveway cross-over between the two properties that allows a vehicle to drive from 267 Mickleham Rd onto 265 Mickleham Rd and towards the Car Park has been there since before the Transfer of Licence Agreement was signed, and in turn, signs on F3’s property directing vehicles over the cross-over and towards the Car Park have been up since 2013. Lanshan has not told F3 that the signs on 267 Mickleham Rd directing vehicles to the Car Park must be taken down.
53.Third, when the parties to a contract have shown by their conduct that they understand and can apply the terms of their contract without difficulty, a court should be very reluctant indeed to pay no attention to such conduct by holding that the terms of the contract are unintelligible by reason of uncertainty.
54.In the present case, there is nothing in the documentary record that shows any difficulty between Lanshan and F3 about the area that was the subject of the Licence Agreement. The evidence of Mr Hernandez was that F3’s tenant’s customers have been using the Car Park from “day one” — i.e., since 28 June 2013. Signs on both properties have directed vehicles to the area in which they may park. In the circumstances, the court should be very reluctant to now invalidate the Licence Agreement on the grounds that it is uncertain.
[2]Kymbo Pty Ltd v Paxton Management Pty Ltd [2001] NSWSC 792 at [24]–[25]; York Air Conditioning and Refrigeration (Australasia) Pty Ltd v Commonwealth (1950) 80 CLR 11 at 26.
[3]Upper Hunter County District Council v Australian Chilling & Freezing Co (1968) 118 CLR 429 at 436-437; see also Meehan v Jones (1982) 149 CLR 571 at 578.
163I add that I am satisfied that both Lanshan and F3 knew what physical area the car park covered when they signed the Transfer of Licence Agreement. This is clear from the fact that the car park was behind a mesh fence that physically separated the car park from the rest of the Motel Property from before the time the Transfer of Licence Agreement was signed.
164Relevantly, the first time the allegation to the effect that the Licence Agreement was uncertain was raised, was in Lanshan’s statement of claim filed in 2020. So for seven years, and throughout its dealings with F3 until then, and the many communications about different aspects of the car park, whilst F3’s tenant was continuing to use the car park, Lanshan had not suggested the Licence Agreement was uncertain or that it was confused about what area was covered by it. Clearly, Lanshan had no difficulty understanding what was covered.
165Lanshan also referred to the fact that the use made of the area at the very west of the Motel Property (beyond the line of trees) had changed over time. Rather than being a tennis court, as shown on the plan annexed to the Licence Agreement, it is now a gravel area sometimes used for additional car parking. But this point does not add anything to the question of construction of the Licence Agreement. At no time were car parking spaces marked on that area of the Motel Property. No one has ever suggested that the car park area in question might include that area, and it does not.
1.4. If the business at 267 Mickleham Road is operated by a lessee, does the Licence Agreement allow the customers of the business to use the car park?
166Yes.
167Lanshan argues (by an amendment to its statement of claim in March 2021) that the Licence Agreement should be construed such that F3’s tenant’s customers cannot use the car park under the Licence Agreement. It seeks a declaration about this in its amended pleading.
168Lanshan submitted:
27.The ordinary meaning of ‘patrons and guests’ plainly does not extend to the respondent. Of the thousands of people who might have attended the Azooba restaurant, it is unlikely that many of the attendees will ever know or give thought to the respondent’s existence and vice versa. A person who attends the house of a friend as a guest, is not also a guest of the friend’s unknown corporate landlord. It would be extraordinary if a patron or guest of a restaurant could be regarded as a patron or guest of the landlord, in circumstances where, absent the necessary express or implied licence to enter the land, and absent the right to exercise a power under the lease, the landlord would be regarded as a trespasser.
169I reject that construction of the Licence Agreement.
170In construing the Licence Agreement I take into account the following principles:
(a) The primary duty when interpreting a written contract is to endeavour to discover the intention to the parties from the words of the instrument in which the contract is embodied.[4]
(b) The test requires asking what a reasonable businessperson would have understood the relevant contractual terms to mean. This is done by reference to the language used by the parties, the surrounding circumstances known to them, and the commercial purpose or objects to be secured by the contract.[5]
(c) An appreciation of the commercial purpose or objects is facilitated by an understanding of the genesis of the transaction, the background, the context, and the market in which the parties are operating.[6] Unless a contrary intention is indicated, a commercial contract is to be construed so as to avoid it making commercial nonsense or working commercial inconvenience.[7]
[4]Australian Broadcasting Commission v Australasian Performing Right Association Ltd (1973) 129 CLR 99 at 109.
[5]Rinehart v Hancock Prospecting Pty Ltd [2019] HCA 13; (2019) 366 ALR 635 at [44]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [47]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [16].
[6]Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640 at [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 at [49].
[7]Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at [82]; Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544 at [17].
171The background in which the Licence Agreement was entered into was that the Adjacent Property is a hospitality venue which requires a car park for those attending, but does not have space for that on its own property. The Adjacent Property owner obtained a permit to operate as a hospitality venue, on the condition, that it enter an agreement with the owner of the Motel Property to use the car parking facilities at the western end of that property. It then entered into the Licence Agreement with the owner of the Motel Property. Whether the licensee operated the venue at the Adjacent Property, or its tenant did, the car park was to be used the same way and for the same purpose. It makes no difference to the licensor.
172I consider that the commercial purpose of the Licence Agreement is furthered by it being construed such that the car park can be used by those using the Adjacent Property whether it is tenanted or not, and that if the Licence Agreement were not so construed, commercial inconvenience would occur.
173F3 is entitled to use the car park to the exclusion of all others. In other words – it can choose who uses the car park. Clearly F3 consents to those visiting the premises, operated by its tenant, using the car park. They are then guests and patrons of F3 in any event.
1.5. If ‘no’ to (1.4), is Lanshan estopped from relying on this construction of the Licence Agreement?
174I do not need to decide this issue, as the answer to Issue 1.4 is ‘Yes’.
175However, I consider that the answer to this Issue 1.5 would otherwise be ‘Yes’.
176Lanshan would be estopped (were it necessary) from asserting that the Licence Agreement prevents visitors to the Adjacent Property from using the car park for so long as F3’s tenant is leasing the Adjacent Property.
177F3 and Lanshan conducted their relations with each other on the basis of an agreed or assumed state of affairs.[8]
[8]Commissioner of Taxation (Cth) v Thomas (2018) 264 CLR 382 at [76]; Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Aust) Ltd (1986) 160 CLR 226 at 244.
178A party claiming a conventional estoppel needs to establish the following:[9]
(a) the party has adopted an assumption as to the terms of its legal relationship with the second party;
(b) the second party has adopted the same assumption;
(c) both parties have conducted their relationship on the basis of that mutual assumption;
(d) each party knows or intends that the other will act on that basis; and
(e) departure from the assumption will cause detriment to one of them.
[9]Sze Tu v Lowe (2014) 89 NSWLR 317 at [431]; Troiano v Voci [2021] VSC 851 at [618]; FJ & PN Curran Pty Ltd v Almond Investors Land Pty Ltd [2019] VSCA 236 at [214]; Bannon v Nauru Phosphate Royalties Trust [2018] VSC 532 at [100] (findings on conventional estoppel upheld on appeal - Bannon v Nauru Phosphate Royalties Trust [2019] VSCA 303 at [72]-[74]); Mineralogy Pty Ltd v Sino Iron Pty Ltd (No. 6) (2016) 329 ALR 1 at [760]; Fonterra Brands (Aust) Pty Ltd v Bega CheeseLtd [2021] VSC 75 at [721].
179I am satisfied that both Lanshan and F3 have operated on the assumption (since November 2013) that the Licence Agreement permitted visitors to the Adjacent Property to use the car park pursuant to the Licence Agreement, even though F3 had a tenant at the Adjacent Property.
180For all but two weeks since F3 has been party to the Licence Agreement, it has leased the premises to its tenant who has been running a business there. F3 settled on the Adjacent Property on 14 June 2013. From 28 June 2013, F3’s tenant, Azooba, has been leasing the Adjacent Property, operating it first to run private functions, and once a new permit was granted, as a restaurant as well. Hernandez gave evidence that Azooba was using the car park from ‘day one’ of its lease of F3’s site, and as to the mesh fence that separated the car park from the rest of the motel, and as to signs that were located on both properties since June 2013, directing customers of Azooba to the car park.
181I am satisfied that throughout this period – since around 28 June 2013 – Lanshan knew that the business at the Adjacent Property was being run by F3’s tenant, and so it was visitors to that business who were using the car park on the Motel Property. (On about 14 June 2013, after F3 settled the purchase of the Adjacent Property, F3’s agent placed a board on the main street, publicly advertising the property for rent.About two weeks later, on 28 June 2013, the property was let to Azooba, and from then on was operated as an Indian restaurant/reception centre. And from 4 November 2013, in various letters Lanshan shows awareness that F3’s tenant is running the business on the Adjacent Property).
182At no time did Lanshan quibble with this – not until March 2021, in the course of this proceeding.
183As F3 submits:‘Unsurprisingly, F3’s belief since 2013 has been visitors to its tenant’s business were entitled to use the Car Park’. Lanshan’s actions as detailed above encouraged that belief.
184I am satisfied that if Lanshan is permitted to depart from the common position assumed by both Lanshan and F3 – that visitors to F3’s tenant’s business were entitled to use the car park under the Licence Agreement – F3 will suffer significant detriment.
…when we instruct an insurance company to do something, unless they actually come back physically within, what we call reasonable time, that they’ve declined the request, then its taken as accepted. … I’ve been in insurance for over 38 years, so, um, I’m well experienced.
324During cross-examination, Xuereb was also taken to the insurance Certificates. He was asked about the Renewal for the period 24 May 2019 to 24 May 2020, and about the inclusion of Westpac as an ‘interested party’ under the ‘Asset Protection’ part of the Certificate.
325The following exchange occurred:
… Does that mean Westpac is also insured for its assets under this insurance policy?---At that time, Westpac was, um, the financier, and all finance companies ask for their interested to be noted under a policy.
Yes, so it’s a matter of interest being noted; it’s not a matter of being insured under the policy?---Correct. … Um, as an interested party, it means that, um – in this case, um, Westpac had an interest in the, ah, assets being insured. So if for whatever reason, um, there was differences in, um, values perhaps – let’s say that, um, there was an understanding in, um, (indistinct) between what was owed to Westpac and what was (indistinct) settled – Westpac would have a claim to the difference. So that means that, um, Westpac is able to make a claim on the insurance policy on their own behalf.
326I note that it was not a part of F3’s case that by naming Lanshan as an interested party, or by previous insurance policies endorsing Lanshan (albeit wrongly spelt Lansham) that F3 had at that stage complied with clause 4. Instead, F3 argued that, properly construed, the policy taken out by F3, applied ‘with respect to the car parking area’ in accordance with clause 4 of the Licence Agreement.
327Lanshan raises a number of arguments as to the inefficacy of the insurance.
328First, Lanshan submits that because ‘car parking area’ in clause 4 of the Licence Agreement is left undefined, it is not possible to determine whether the insurance policy taken out by F3 provides coverage ‘with respect to the car parking area’.
329It then submits that, because the phrase ‘car parking area’ is not defined, it must take on its ordinary meaning. It does not provide a definition of the ordinary meaning of ‘car parking area’. It submits that:
‘Car parking area’ is not coextensive with ‘car parking spaces’ or even ‘the land occupied by all car parking spaces in aggregate’. A person might walk in the car parking area without walking across a car parking space. ‘Car parking area’ is not defined in the licence agreement, giving rise to the question of how one can determine whether the physical coverage of the policy in late 2019 was adequate[.]
330Secondly, Lanshan submits that the Licence Agreement does not restrict the scope of the required insurance by reference to F3’s business or business activities. As I understand the submission, Lanshan says that because the insurance taken out by F3 does limit the coverage to liability arising from F3’s business, it does not comply with clause 4.
331Lanshan says that the insurance contract exclusions are not and cannot be read as generative of coverage.
332Lanshan expanded upon its arguments during oral closing. At its core, the argument was that the insurance policy does not actually extend to the car parking area and therefore does not comply with clause 4 of the Licence Agreement.
333The argument was developed as follows:
· the insurance policy purports to cover liability arising from an occurrence in connection with F3’s business;
· whilst the policy may cover some things that happen in the car park that are in connection with F3’s business, equally there may be things that happen in the car park that are not caused by an occurrence in connection with F3’s business;
· therefore the policy was deficient because it did not cover things that might happen in the car park that have nothing to do with F3’s business.
334F3 submits that the phrase ‘in connection with’, as found in the insurance contract, is of wide import.
335F3 says that:
254.Under the Licence Agreement, F3 has use of the Car Park to the exclusion of all others. The Licence Agreement is a condition of the permitted use of 267 Mickleham Rd as a restaurant for use by visitors. The Car Park is – in fact – used by visitors to 267 Mickleham Rd. The car park should therefore be treated as a part of F3’s business. Certainly, the provision of the Car Park is an activity incidental but related thereto.
255.Once the above proposition is accepted, it follows that any injury that occurs in the Car Park occurs “in connection with” F3’s business. This means that F3 has maintained public liability insurance with respect to the Car Park.
336In response to Lanshan’s claim that the insurance policy taken out by F3 covers only in respect of its business or business activities, F3 says that ‘any injury that occurs in the Car Park’ would be covered by the policy, not merely those involving a customer of its tenant.
337F3 further submits that:
97.… Lanshan bears the onus of proving a breach. Lanshan has not put on any evidence that proves the insurance policy maintained by F3 is defective when compared to the kind of public liability insurance that would otherwise be available in the market. As well, whatever points of construction Lanshan may have in relation to the insurance policy, the Court needs to be satisfied on the balance of probabilities that ultimately the insurance policy would not cover the relevant injury. In the absence of the insurer denying coverage or a court making such a finding, it cannot be said insurance would not have covered the relevant injury or damage.
Finding
338I am satisfied that the content of the PDS (which contained the general terms and conditions applicable to the Policy), the Closing and the Renewal, together comprised the policy documents containing the terms and conditions of the Policy.
339The critical parts of those documents make it clear that, as at 5 September 2019, F3 held business insurance under the Policy, which included public liability insurance to a sum of $10 million per insured event or occurrence, and provided cover for all amounts which F3 may legally liable to pay as compensation for personal injury and/or property damage arising in connection with F3’s business (as defined in the policy wording).
340By the terms of the PDS, F3’s business extended to ‘…any other activity incidental but related thereto including, ownership of premises (PDS p.9), which by this definition, and allied to the definitions of premises, property, and building, extended to cover the car parking spaces. F3’s business comprised its business interests as owner of the Adjacent Property and extended to its lease arrangements to the tenant of the Adjacent Property, who operated the Indian restaurant.
341Public liability insurance provides an insured with protection against liabilities to third parties arising in connection with the insured’s activities on or around its property and business interests. This was the purport of Xuereb’s evidence when he was asked what liability protection was. He explained that:
…liability protection is otherwise known as public liability. Um, and we’re covering bodily injury or property damaging arising out of the insured’s business, ah, through negligence.
342That evidence is borne out in the definitions of personal injury and property damage described in the PDS.
343I am satisfied that, regardless of what the policy was called, the insurance taken by F3 included public liability insurance, with public liability cover for the car parking area.
344The scope of the policy seems to me to fall within even the ‘ordinary meaning’ of public liability insurance, as defined by Lanshan.
345Lanshan submitted that because there is no definition, the ordinary meaning of public liability insurance, which Lanshan submitted meant ‘insurance for liability to loss or damage cause to the public’, must apply.
346In its written closing submissions, Lanshan asserted, without citation:
112.The ordinary meaning of ‘public liability insurance’ is insurance that provides indemnity for acts that cause personal or property damage to third parties, for which the insured becomes liable to compensate. However, because ‘property’ is defined as ‘buildings and/or contents owned by the Insured or for which the Insured is responsible or has assumed responsibility to insure prior to a loss’ the real scope of protection is very narrow and could not be properly regarded as ‘public liability insurance’ at all.
347In closing oral submissions, Lanshan submitted that the Macquarie Dictionary definition of ‘public liability insurance’ ‘provides a guide as to what is the ordinary definition’:
insurance which protects the policyholder against risks involving liability to the public for legal damages occasioned by negligence.
348I do not agree that the scope of protection is very narrow and could not be regarded as public liability insurance. As is apparent from an evaluation of the terms of the Policy, in the event F3 became legally liable to pay compensation for personal injury or property damage to a third party caused by an occurrence (being an event causing personal injury or property damage, neither expected nor intended from the standpoint of the insured), which took place in or in relation to the car park during the Policy period, then that occurrence was covered under the terms of the Policy.
349I consider that the car parking spaces provided for the exclusive use of F3 under the Licence Agreement constitute property in the physical control of F3, available through it to its tenant and those attending the Indian restaurant on the Adjacent Property. I also consider that they constitute property ‘…for which the Insured is responsible or has assumed responsibility to insure prior to a loss.’
350Having regard to the terms of the Policy, I am satisfied that by taking out the Policy, F3 complied with its clause 4 obligation. This conclusion is consistent with the plain words contained in clause 4, the purpose and object of that clause, and the broad purpose behind the Licence Agreement, which was to enable those attending the event centre/restaurant business at the Adjacent Property to have access to the car parking spaces. By the terms of the Licence Agreement, and in return for that right, F3 assumed responsibility for the car parking area and more specifically (by clause 4) assumed responsibility to insure the car parking area. It follows that the car parking area was property used by F3 in connection with its business and that an occurrence causing personal injury or property damage in, or in relation to, that area was an occurrence covered by the Policy.
351By taking out and maintaining the Policy, F3 was complying with its obligations under clause 4 of the Licence Agreement.
352It was for Lanshan to prove that F3 had not complied with that obligation. It has failed to do so.
353As a consequence, Lanshan’s contention to the effect that F3 had repudiated the Licence Agreement, or that it had committed a default of the Licence Agreement so as to entitle Lanshan to rescind at law or pursuant to clause 6 of the Licence Agreement, is not made out.
3.2.3. If ‘no’ to (3.2.1) or (3.2.2), was Lanshan entitled to terminate the Licence Agreement?
354As I have answered ‘Yes’ to both Issue 3.2.1 and Issue 3.2.2, it is strictly unnecessary for me to answer Issue 3.2.3. However, I indicate that in the event I had answered ‘No’ to Issues 3.2.1 or 3.2.2, I would have answered Issue 3.2.3, ‘No’.
History of the parties’ answer to (3.2.3)
355Through much of the trial, both parties had an agreed position, that if I answered ‘No’ to Issues 3.2.1 or 3.2.2, then Lanshan was entitled to terminate the Licence Agreement. In other words, at that time they agreed the answer to Issue 3.2.3 in those circumstances should be ‘Yes’.
356However, that agreement arose before Lanshan introduced new arguments in oral closing submissions, on what constituted F3’s default in relation to maintaining the relevant insurance. As a result of this alteration of Lanshan’s position, F3 now says that Issue 3.2.3 must be answered ‘No’.
Background to termination
357The ability to terminate following a Notice of Default is provided by clause 6 of the Licence Agreement, which requires written notice identifying the default:
The licence hereby created shall cease and be determined if the Licensee is in default of any of the terms of this licence and the Licensor has served a written notice on the Licensee identifying the default and the Licensor’s intention to determine the licence unless the default is remedied within fourteen days of the service of any notice and the Licensee fails to comply with that notice.
358In the 5 September 2019 Notice of Default, Lanshan referred to the requirement that the licensee shall maintain a public liability insurance policy with respect to the car parking area to a sum not less than $10 million, and stated that F3 had ‘failed to maintain the requisite PL insurance’.
359Lanshan claimed that the alleged defaults amounted to repudiation of the Licence Agreement and claimed, by the letter, to serve as notice that Lanshan had accepted such repudiation.
360The letter went on to state:
Alternatively, if the Licence is not terminated by the Repudiation, then within 14 days of the date of this Notice, the Licensee in order to remedy the breaches of the Licence as detailed in this Notice, must:
…
(d)provide evidence satisfactory to the Licensor that during the Licence Period the Licensee has:
(i) …
(ii) effected and maintained the PL Insurance…
…
Inadequate Default Notice
361F3 submitted that, properly construed and when read in context, clause 6 required sufficient particulars of an alleged default to be given in order to give F3 an opportunity to remedy the default within the 14 days allocated.
362F3 argued that:
49.… if there is a complaint about the terms of the insurance policy obtained, the Licensor must be given sufficient information to enable the Licensee to assess the complaint and remedy the issue (assuming the complaint is valid), either in consultation with their insurer, or with a different insurer. It completely undermines the purpose of clause 6 if the alleged default is a mystery to the Licensee, who is left to winkle out an alleged default. In the present case, Lanshan did not even have a copy of the terms of the insurance policy when it issued its default notice, and it admits it came up with at least one of its arguments a year after the commencement of the trial.
50.The Licence Agreement, intended to run for 99 years, operates consistently with business common sense if the Licensee is entitled to be given some notice about any alleged default arising from the terms of its insurance policy so that it can remedy the default to the satisfaction of the Licensor.
51.In the present case, the Default Notice did not identify the default — as it is now articulated in Lanshan’s closing submissions — in a way that would then allow F3 to remedy the default.
363Lanshan was given the opportunity, but did not respond to F3 on this point. (I note for completeness that Lanshan stated that a lack of express response did not mean it conceded a point).
Construction of default notice
364In construing the default notice, I take into account the following principles:
· the construction of a default notice must be approached objectively, from the standpoint of what reasonable persons in the same circumstances and with the same knowledge as the actual parties would have had in mind (FPM Constructions v Council of the Blue Mountains [2005] NSWCA 340, [151] (Basten JA, Beazley JA agreeing) (FPM); Yan & Anor v Zhang [2018] VSC 694, [111] (Yan));
· it is important that a notice identify the applicable clause of the contract said to be breach (Yan, [112]);
· each case ultimately turns on what the particular contractual provisions relating to what the default notices require (Diploma Construction Pty Ltd v Marula Pty Ltd [2009] WASCA 229, [71] (Newnes JA) (Diploma); FPM, [151] (Basten JA, Beazley JA agreeing); Yan, [113]));
· the default notice must bring to the attention of the recipient what the default is alleged to be (Diploma, [77] (Newnes JA); FPM, [151] (Basten JA, Beazley JA agreeing); and
· ‘…it cannot be left to the [recipient] to winkle out an alleged default from an equivocal, vague or imprecise notice’ (Diploma, [79] (Newnes JA)).
365Though important, the identification of the particular clauses said to be in breach, is not decisive when considering whether a notice of default is valid.
366What is more important is whether a reasonable person, standing in the shoes of F3, would be able to identify the relevant clauses said to be in breach. So, Lanshan’s failure to point to the particular clauses said to be in breach in the default notice is not prohibitive to a finding it was valid. Given the length of the Licence Agreement, I do not consider that F3 would have been left guessing at the provisions said to have been breached (FPM, [151] (Basten JA)).
367The letter states some of the terms of the Licence Agreement in the paragraph immediately before the paragraph listing alleged breaches.
368It is Lanshan’s failure to particularise the alleged breach in the Notice of Default that is the real issue here.
369I do not consider that identifying an alleged failure to maintain ‘the requisite PL insurance’ would adequately bring to the attention of someone, in the shoes of and with the knowledge of F3, what the default is alleged to be (Diploma, [77] (Newnes JA); FPM, [151] (Basten JA, Beazley JA agreeing).
370The point of a default notice is to be given the chance to fix the problem, within the specified time period.
371Plainly, that could not happen in circumstances where Lanshan only clearly identified the alleged problem with the insurance F3 took out, long after sending the Notice of Default. (Lanshan says in submissions dated 5 April 2022 that it had to issue subpoenas to see the relevant insurance documents and these returned information just before the trial, and that ‘it was in the context of the trial having properly commenced that the plaintiff sought to understand how the terms operated’. Regardless of why it identified the alleged defects once the trial had ‘properly commenced’, the fact remains it had not identified them when the Notice of Default was sent).
372I consider that Lanshan’s letter of 5 September 2019 was not a valid default notice in relation to the insurance issue. It did not give sufficient information to enable F3 to remedy the alleged default (for example, by detailing as it did during this trial that the type of insurance taken out was inadequate to answer the requirements of clause 4, and why).
373In those circumstances, Lanshan was not entitled to terminate the Licence Agreement relying on the default notice.
CONCLUSION
374Lanshan is bound by the Licence Agreement.
375I direct the parties to each provide a draft of the orders that should be made as a result of this judgment, including as to costs. If a hearing is required on these matters, it will be listed.
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Certificate
I certify that these 85 pages are a true copy of the reasons for judgment of Her Honour Judge Marks, delivered on 8 November 2022, revised on 9 November 2022.
Dated: 8 November 2022
Jack Rudman
Associate to Her Honour Judge Marks
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